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Have companies become too specialized?


Harvard Business Review Digital Articles


Strategy and Entrepreneurship

Authors / Editors

Markides C;Vermeulen F

Publication Year



Starting in the late 1980s, a de-diversification wave swept through corporate America, on the premise that conglomerates and highly diversified companies would perform better by focusing on their core businesses. But capital is not the only resource that can be redeployed and reconfigured within a diversified corporation. Companies diversify into new markets in order to exploit underutilized assets or competences. Intangible resources, such as reputation, can be better leveraged and exploited within the confines of a multi-divisional corporation. Managers can more easily recognize and capitalize on innovation opportunities within the boundaries of a diversified firm than when they occur in the open market. Now, digitization has decreased the costs of managing diversification, while simultaneously increasing its benefits. As a result, the optimal level of diversification is rising. Hence, the de-diversification of firms over the past decade is taking place in a context where more diversification is warranted.

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